Integration of world leaders and emerging powers into the Malaysian stock market: A DCC-MGARCH approach

Hooi Hooi Lean () and Kee Tuan Teng

Economic Modelling, 2013, vol. 32, issue C, 333-342

Abstract: This paper examines the financial integration of two world leaders (the U.S. and Japan) and two emerging powers (China and India) into the Malaysian stock market. A DCC-MGARCH approach is employed to examine the correlations among these countries in a time-variant manner to indicate the degree of financial integration among the countries. It is found that the financial integration between Malaysia and China started to evolve in April 2004. Strong financial integration between the stock markets in India and Malaysia was observed. In contrast, the volatility spillover effect from the U.S. to Malaysia disappeared, especially in the short term. Nevertheless, the study suggests that in the long run, investors in Malaysia could gain by diversifying their portfolios in China and Japan relative to India and the U.S.

Keywords: Financial integration; DCC-MGARCH; China; Volatility spillover (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:32:y:2013:i:c:p:333-342

DOI: 10.1016/j.econmod.2013.02.013

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